RESULTS
3RD QUARTER AND NINE MONTHS OF 2016/17
1 APRIL 2016 TO 31 DECEMBER 201616 February 2017

Agenda1. LEM at a Glance
2. Highlights and Business Review
3. Financial Review
4. Strategy and Outlook

HAH3

2Results 3rd quarter and nine months of 2016/17

1. Global Market Leader in Current and Voltage Transducers
Market Position

Performance

Perspectives
LEHN

SMI

Source: Swissquote••••3

Global market shareof 50+% in Industry
Benchmark inservice and productquality
4 production sites inEurope and Asia
Sales of CHF 261.5
million in 2015/16•••Market capitalizationof CHF 1 billion
Dividend yield >4% ineach year since 2009
Continued sales
growth and strong
margins

Results 3rd quarter and nine months of 2016/17

••

•
•

Reinforced investment in innovation
Solid growth perspectives due tounderlying trends
Strong foothold in
China
EBIT margin target of
15 to 20%

1. LEM Applications:
Sewing Machine/Embroidery Machine4

Full servo control allows for speed andprecision in industrial sewing/embroiderymachines.

7Accuracy and speed of the table movements,
as well as the correct, accurate andregulated rotation speed of the main axis forthe needles are directly linked to the currents
provided to the motor (5) through a servodrive (1). The working table (7) is moving inhorizontal X and Y directions thanks to linear
motors (6) controlled by two position servodrives (1).

35
2

6

6
1

A

1 Servo drives
2 Control unit
3 Head4 Main axis
5 Motor6 Linear motors
7 Working table
4A HLSR 10-P

Current transducers (A) are used in each
servo drive to measure two of its three phase
output AC currents. Their accuracy, highperformance, high temperature working
environment, low temperature drift contributeto a very stable, quick, reactive, reliable andprecise system.

Results 3rd quarter and nine months of 2016/17

1. LEM Applications:
Roller Coaster
Roller coasters use less and less traditional
chain lift. The ride is maintained by gravity.
1

The initial acceleration energy is provided via
one or several linear motors (4), catapults, orother mechanisms replacing hydraulic or
pneumatic power. In case of linear motors thepropulsion of the carts (1) along the track atvarious stages is managed using electromagnetic fields that require high currents.

2435A

1 Train / cart
2 Drive tire

A LF 1005-S

3 Inverter for drive tire
4 Linear motor

These electrical linear motors enable thevarious torques and accelerations in time andduration. The motors are controlled byelectrical drives via the currents supplied. The
current transducers (A) give the feedback tothe control loop (5) in order to ensure theright accelerations independently of the load
and friction of the train.

5 Inverter for linear motor and control unit

5Results 3rd quarter and nine months of 2016/17

1. LEM Applications:Hybrid Loader

A HTFS 800-P

612
5

1 Diesel engine
2 Generator
3 Inverter
4 Electrical motor
5 Transmission

34A

A hybrid loader boosts fuel economy by up to25%, increases the system performance andis half as loud as a conventional loader.
The special internal combustion engine (1)drives an AC generator (2) for the bucket
moves. The generator converts the engine's
mechanical energy into electrical energy,
which is converted by the inverter (3) tosupply the electrical motor (4) to drive thetransmission and the wheels.
The currents are measured with current
transducers (A) to control the inverter. The
accuracy of the current measurements allows
to maximize the motor torque and overall
motor efficiency. The transducers also enable
the control system to sense over-current
situations signaling a potential defect.

6 Battery

6Results 3rd quarter and nine months of 2016/17

1. LEM Applications:Hybrid-electric vehicles / electric vehicles

1 High voltage battery

A DHAB V2

2 Charger
3 Motor controller
D CAB500

4 Electric motor and transaxle

D5 DC/DC converter

C HSN

1B2AD

3AC

4AC
57

B HAH3

Battery management
The battery management system (BMS)
adjusts the charging process through thecombustion engine in a hybrid-electricvehicle or gives the information for external
charging of the high-voltage battery (1) inan electric vehicle. CAB (D), DHAB (A)provide all necessary current information athigh accuracy level to the BMS to improvethe efficiency of the charging process.
Motor control
The motor controller (3) takes power fromthe batteries and delivers it to the electricmotor (4). The accelerator pedal gives thesignals. HAH3 (B), HSN (C) are integrated
in the inverter modules (5) and provide
current signals at very high speed in order
to assure a smooth and jerk-freeacceleration.

Results 3rd quarter and nine months of 2016/17

1. Diverse Target Markets – Diversified Businesses

Businesses

Share of sales
9M 2016/17 Cyclicality

Green Cars
Conventional Cars

Macro drivers

Consumer durables Technology adoption (electrification)
19%

Fuel savings

High precision
Late cycle

Infrastructure investments

Mid cycle

Energy prices, subsidies

Early cycle

Industrial investment

Traction
Renewable energies& power supplies
81%

Drives & welding

Automotive segment
Industry segment
8

Results 3rd quarter and nine months of 2016/17

Agenda1. LEM at a Glance
2. Highlights and Business Review
3. Financial Review
4. Strategy and Outlook

LF20109

Results 3rd quarter and nine months of 2016/17

2. Volatile Business Sentiment
In CHF millions, %9M 2016/17

9M 2016/17 vs.
9M 2015/16

Q3 2016/17 vs.
Q3 2015/16

Orders

200.0

+3.0%

+0.6%

Sales

197.8

-0.5%

-3.0%

EBIT

41.7

+2.5%

-10.2%Net profit

32.7

+3.8%

-9.5%

• In total stable sales, but mixed underlying sales performance
By business

By regions+Drives & welding, green cars

North America, rest of Asia

-Traction, renewable energies China, Europe• Maintained robust operating margins• Increased production capacities for new products• New R&D center in Lyon to be operational in April 201710Results 3rd quarter and nine months of 2016/17

2. Net Sales
In CHF millions

In CHF millions, %300

9M vs. 9M
asreportedIndustry

164.5

-3.0%

-3.5%

-3.0%

Automotive

34.3+11.5%+10.3%

-3.0%

Total

198.7

-0.5%

-1.1%

-3.0%

275
250
225
200

Q3 vs.
atQ3
constantcurrencies

Sales

175150

•

125

•
•

100
75

Weakening Industry and strong growth inAutomotive businesses
Important regional differences
Little currency impact on sales

50
25
0
12/13*

13/14

14/15

15/16

9M 16/17* Restatement following IAS 19R application (pensions)

11Results 3rd quarter and nine months of 2016/17

2. Quarterly View
In CHF millions

Book-to-bill ratio
1.2

80
70.0
70

65.0

66.5

67.2

64.7
61.5

61.5

66.9

65.7
65.1

62.7

1.0

60
0.8
50

0.6

4030
0.4200.2
100.00
Q1
14/15

Q2
14/15

Q3
14/15

Q4
14/15

Q1
15/16

Orders received

12

Q2
15/16

Q3
15/16

Sales

Q4
15/16

Q1
16/17

Q2
16/17

Q3
16/17

Book-to-bill ratio

Results 3rd quarter and nine months of 2016/17• Book-to-bill ratio
increased to 1.04 in
Q3 of 2016/17• Market uncertainties andshrinking inventories atcustomers translating
into shorter termbookings

2. Industry Segment: Regional Markets
EuropeIn CHF millions, %Sales

Growth9M vs. 9M

GrowthQ3 vs. Q3

Europe61.2

-6.0%

-8.2%

N. America

19.9+10.4%+19.6%

Asia andROW

78.5

-3.5%

-3.5%

Total

159.5

-3.0%

-3.0%

North America
Asia and RoW
38%

49%

• Sales in China and most of Europeslowed• China the single most important country
representing 31% of sales• Strong recovery in North America
13%

13Results 3rd quarter and nine months of 2016/17

2. Industry Segment: Business Development
In CHF millions

Op. EBIT in % of sales

24025%

20020%

16015%
120

Businesses and Applications
Drives & welding (growth 9M vs. 9M: +9%)
• Sales growth across all regions• Better market environment in Germany andUSA• Won market share thanks to new products
Renewable energies & power supplies (-12%)• Slowing business in all regions• Consolidation in the Chinese solar panel andinverter market• Increased activity in smart grid applications

10%
805%
4000%
12/13*

13/14

14/15

15/16

9M 16/17

Traction (-13%)• Lower rail infrastructure investments globally• Delayed investments in Chinese high speed
trains and export projects
High-precision (-3%)• Growth in US medical applications• HVDC projects in China completed; no followup projects* Restatement following IAS 19R application (pensions)

14

Results 3rd quarter and nine months of 2016/17

2. Automotive Segment: Regional Markets
In CHF millions, %Sales

Growth9M vs. 9M

GrowthQ3 vs. Q3

Europe3.0+22.5%-15.4%

N. America

14.7-4.8%-21.2%

Asia andRoW

20.5+25.3%+14.1%

Total

38.2

+11.5%-3.0%

EuropeNorth America
Asia and RoW8%

•
54%

••
38%

15Performance driven by growth of green
cars business across all regions
Won award from customer for overall
performance
Increasing competitive pressure in agrowing market

Results 3rd quarter and nine months of 2016/17

2. Automotive Segment: Business Development
In CHF millions

Op. EBIT in % of sales

5030%

45

Businesses and Applications
Conventional cars (9M vs. 9M: -7%)
• Weaker US market

25%403520%302515%20

Green cars (HEV, EV) (+64%)• Reduction of government subsidies in China
slowing growth rates• Increasing consumer acceptance andgovernment support for green cars tounderpin future growth• LEM well represented in newly launchedelectric and hybrid-electric vehicles

10%15105%
500%
12/13*

13/14

14/15

15/169M 16/17* Restatement following IAS 19R application (pensions)

16Results 3rd quarter and nine months of 2016/17

2. Business Development ChinaSalesProduction•••

Market share of over 50%
Most important market with 31% oftotal sales

LEM China stabilizes its #1 position aslargest manufacturing site of the Group(60% of total production, compared to64% in financial year 2015/16)“Made by LEM” quality•

In CHF millions

In CHF millions

180

90160

80

140

70
60

120

50100

4080

30

60

2040

1020012/13

1713/14

14/15

15/16

9M 16/17

012/13Results 3rd quarter and nine months of 2016/17

13/14

14/15

15/16

9M 16/17

2. Business Development Bulgaria

Production•15 production lines relocated fromJapan and Switzerland to Bulgaria
Headcount at 225 FTE
Introduced a local development
team and shared services••In CHF millions
30
25

Objectives of the site
•
••
•

18

Diversify LEM’s cost-competitive
production
Increase production capacity close toEuropean customers
Increase natural hedge of operations
Absorb major part of LEM’s future
growth

20
15
10
50
13/14

Results 3rd quarter and nine months of 2016/17

14/15

15/16

9M 16/17

Agenda1. LEM at a Glance
2. Highlights and Business Review
3. Financial Review
4. Strategy and Outlook

HLSR

19

Results 3rd quarter and nine months of 2016/17

3. Financial Highlights• Robust profitability• Gross margin of 47.0%• EBIT margin of 21.1%• Net profit CHF 32.7million• Stable operating expenses despite investments in future growth20

Results 3rd quarter and nine months of 2016/17

3. Income Statement
In CHF millions

21

9M
2015/16

9M
2016/17

ChangeQ3
2015/16

Q3
2016/17

ChangeSales

198.7

197.8

-0.5%

67.2

65.1

-3.0%

Gross margin

46.2%

47.0%

+0.8pt

47.6%

48.4%

+0.8ptOperating expense

-51.2

-51.3

+0.1%

-16.2

-17.4

+7.5%

EBIT

40.6

41.7

+2.5%

15.8

14.1

-10.2%Net financial exp.

-0.8

-0.8

-6.0%

-1.3

-0.7

-45.2%

Income tax

-8.3

-8.2

-1.4%

-2.8

-2.9

+3.1%

Net profit

31.5

32.7

+3.8%

11.7

10.6

-9.5%

Results 3rd quarter and nine months of 2016/17

3. Results by Quarter
In CHF millions

In % of sales

8030%
70.07065.0

66.567.264.7
61.5

66.9

65.7

62.7

61.5

65.1

25%

60
20%
5015%

4030
10%
205%
100%

0
Q1
14/15

Q2
14/15

Q3
14/15

Q4
14/15

Orders received

22

Q1
15/16
Sales

Q2
15/16

Q3
15/16
Op. ROS

Results 3rd quarter and nine months of 2016/17

Q4
15/16

Q1
16/17

Q2
16/17

Net Profit in % of sales

Q3
16/17

3. Gross Margin
In CHF millions

In % of sales

9M
2015/16

9M
2016/17

Q3
2015/16

Q3
2016/17

91.8

92.9

31.9

31.6

46.2%

47.0%

47.6%

48.4%

48%

140

Gross margin

47%in CHF millions

12046%Gross margin
100in % of sales

45%
44%

8043%60

•

42%
41%

4040%
2039%
0•

Positive impacts on gross margin due torelocation to cost-competitive
manufacturing sites and optimized
sourcing and foreign exchange
development
Continuous price pressure

38%
12/13*

13/14

14/15

15/16

9M 16/17* Restatement following IAS 19R application (pensions)

23

Results 3rd quarter and nine months of 2016/17

3. SG&A
In CHF millions

In % of sales

60

25%

SG&A
in CHF millions

50SG&A20%

in % of sales

9M
2015/16

9M
2016/17

Q32015/16Q3
2016/17

40.3

39.4

12.5

13.5

20.3%

19.9%

18.7%

20.7%

4015%

•3010%
205%
100%

0
12/13*

13/14

14/15

15/16

•

One-off cost in 2015/16 due toorganizational changes, introduction ofnew ERP release, build-up of European
logistics and distribution platform
Ongoing recruitment in Beijing and Sofia
and set-up of new R&D center in Lyon in
2016/17

9M 16/17* Restatement following IAS 19R application (pensions)

24

Results 3rd quarter and nine months of 2016/17

3. R&D Expense
In CHF millions

In % of sales
8%

16R&D
expense149M
2015/16

9M
2016/17

Q3
2015/16

Q3
2016/17

10.9

11.8

3.7

4.0

5.5%

6.0%

5.5%

6.1%

in CHF millions

R&D
expense6%

12in % of sales

104%

86

42%

20•
••

Ongoing renewal of product range
Develop new technologies to tap newmarkets
Increase investment in R&D for bothsegment with start of new R&D centerin Lyon in April 20170%
12/13*

13/14

14/15

15/16

9M 16/17* Restatement following IAS 19R application (pensions)

25

Results 3rd quarter and nine months of 2016/17

3. EBITIn CHF millions

In % of sales

6026%

EBIT

24%

in CHF millions

9M
2015/16

9M
2016/17

Q3
2015/16

Q3
2016/17

40.6

41.7

15.8

14.1

20.4%

21.1%

23.5%

21.7%

5022%

EBIT
in % of sales

20%
4018%
3016%
14%

••

20
12%
10%
10

•

Robust operating margins maintained
Continued cost control and productivity
improvements
One-time operating expenses in 2015/16 and2016/178%06%
12/13*

13/14

14/15

15/16

9M 16/17* Restatement following IAS 19R application (pensions)

26Results 3rd quarter and nine months of 2016/17

3. Financial Expense
In CHF millions

9M
2015/16

9M
2016/17

Exchange effect*-0.6

Other financial expense &incomeTotal

Q3
2016/17

-0.7

-1.1

-0.7

-0.2

-0.1

-0.2

-0.1

-0.8

-0.8

-1.3

-0.7

•

Exchange effect impacted by negative valuation of USD currency hedges•

Foreign exchange hedging policy (unchanged)*27

Q3
2015/16•

EUR: 100% of net exposure 12 months forward•

USD: 100% of net exposure 12 months forward

The line “exchange effect” in the financial result is mainly due to currency volatility during the time between booking and settling a receivable/
payable. Over and above this line, foreign exchange rates impact every P&L line through the rate at which each transaction is booked and atwhich it is consolidated into CHF.

Results 3rd quarter and nine months of 2016/17

3. Income Taxes
9M
2015/16
19.6%
2.0%

9M
2016/17
18.1%
1.2%

Expected tax rate

21.6%

19.4%

Other differences

-0.7%

0.7%

Effective tax rate

20.9%

20.1%

Expected income tax rate
Expected withholding tax rate

•28

Lower tax rate linked to changed composition of revenues and profits

Results 3rd quarter and nine months of 2016/17

3. Net Profit
In CHF millions

In % of sales
20%

50

Net profit

4518%

in CHF millions

Net profit

4016%

in % of sales

9M
2015/16

9M
2016/17

Q3
2015/16

Q3
2016/17

31.5

32.7

11.7

10.6

15.8%

16.5%

17.4%

16.2%

35

9M 2015/16
14%

30
2512%

20

10%

-0.8
-8.3

40.6

EBIT

31.5

Financial expense

Income tax

Net profit15

9M 2016/17

8%

-0.8

10-8.2
6%

50

41.7

4%
12/13*

13/14

14/15

15/16

9M 16/17

EBIT* Restatement following IAS 19R application (pensions)

29

32.7

Results 3rd quarter and nine months of 2016/17

Financial expense

Income tax

Net profit

Agenda1. LEM at a Glance
2. Highlights and Business Review
3. Financial Review
4. Strategy and Outlook

ATO

30

Results 3rd quarter and nine months of 2016/17

4. Market Factors and Strategy• We firmly believe in our strategic
direction and the 4 drivers for ourbusiness remain unchanged• We will continue to capitalize on
the drivers of LEM’s markets
through• pure play components company• diversification across geographiesand businesses

31

Results 3rd quarter and nine months of 2016/17

4. Outlook32•

Expectation for the full financial year 2016/17• Sales of CHF 260 – 270 million• EBIT margin above 20%•

Sales trends for remainder of 2016/17• Seasonality to impact sales in China in Q4 (Chinese NewYear)• Customers to maintain pressure on prices and short termordering policy

Results 3rd quarter and nine months of 2016/17

Q&A

Financial Calendar and Contact Details

Financial calendar
The financial year runs from 1 April to 31 March

23 May 2017*29 June 2017*
4 July 2017*
6 July 2017*

Year-end results 2016/17
Ordinary General Meeting of Shareholders for thefinancial year 2016/17
Dividend ex-date
Dividend payment date

* New dates

For further information
Andrea Borla, CFO
Phone: +41 22 706 12 50
E-mail: investor@lem.com

34Results 3rd quarter and nine months of 2016/17